Part A -
1. What are the major risks in investing in Saudi Arabia? How do major companies classify Saudi Arabian National Market? Do you agree with that classification?
2. What are the major risks, and rewards in investing in this Aramco IPO deal?
3. Considering the risks and rewards, would you invest in this venture?
Part B -
Problem in Forecasting Interest Rates based on unbiased expectations theory:
These are the rates today (June 15, 2018) for loans of equal risk.
R1 = 2%;
R2 = 3%
R3 = 4%
R4 =5%
A. Given this information, calculate one-year forward rate for a one-year loan beginning 6/15/19 and ending on 6/15/20.
B. Calculate the two-year forward rate for a one-year loan beginning 6/15/20 and ending on 6/15/21.
C. Calculate the three-year forward rate for a one-year loan beginning 6/15/21 and ending on 6/15/22.
D. Calculate the two-year forward rate for a two-year loan beginning 6/15/20 and ending on 6/15/22.